Statistics for Business: Decision Making and Analysis, 3rd Edition

Questions for Thought

1. If you repeat the dice game several times, or perhaps in a class, you might find that Red occasionally comes out the winner. Seeing that all of the others lose with Red, how might it be that some team comes out ahead with Red?¹

   ¹ For more on this perspective, see our paper D. P. Foster and R. A. Stine (2006). “ Warren Buffett: A Classroom Simulation of Risk and Wealth When Investing in the Stock Market.” The American Statistician, 60, 53–60.

2. Is Pink the best mix of Red and White? There’s no rule that says a portfolio has to be an equal mix of two investments.

   1. Find the mean and variance of a portfolio that has 60% invested in White and 40% invested in Red.

   2. Does the portfolio in (a) outperform Pink in the long run?

   3. How might ...